We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.

What Are the Different Types of Capital Market Products?

By A. Lyke
Updated May 16, 2024
Our promise to you
SmartCapitalMind is dedicated to creating trustworthy, high-quality content that always prioritizes transparency, integrity, and inclusivity above all else. Our ensure that our content creation and review process includes rigorous fact-checking, evidence-based, and continual updates to ensure accuracy and reliability.

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

Editorial Standards

At SmartCapitalMind, we are committed to creating content that you can trust. Our editorial process is designed to ensure that every piece of content we publish is accurate, reliable, and informative.

Our team of experienced writers and editors follows a strict set of guidelines to ensure the highest quality content. We conduct thorough research, fact-check all information, and rely on credible sources to back up our claims. Our content is reviewed by subject-matter experts to ensure accuracy and clarity.

We believe in transparency and maintain editorial independence from our advertisers. Our team does not receive direct compensation from advertisers, allowing us to create unbiased content that prioritizes your interests.

The term capital market refers to the network of procedures and institutions that facilitate transactions of long-term financial products. These are usually sold from a corporation or government to investors, or traded between investors. Several different types of capital market products exist, various kinds of bonds and stocks, sometimes called equity securities. In the U.S., companies and investors may also store funds in U.S. Treasury bill bonds and federal agency securities.

Two important elements of the capital market are organized security exchanges and over-the-counter markets. Organized security exchanges are physical places where capital market products are traded. Any kind of trading arrangement that doesn’t happen at an organized security exchange happens at over-the-counter markets. Financial managers have several payment arrangement options when buying and selling securities on these markets, including checks, automatic transfers, wire transfers, and cash accounts.

Stocks are some of the most popular capital market products. There are two basic types of stock, common and preferred. Common stocks are ownership shares of a corporation sold on the capital market to investors. In return for the investment, stocks pay shareholder’s dividends that vary in amount depending on the overall financial health of the company. Stocks likely to pay higher dividends are traded at higher prices.

Speculation on the financial health of a company shifts its stock price, which leads to the up-and-down trading prices common to many modern capital markets. Preferred stocks may not be sold publicly, and unlike common stock, preferred stocks have fixed dividend payment amounts that don’t vary depending on the corporation’s standing. Non-payment of due dividends does not force bankruptcy for either common or preferred stocks.

Compared to stocks, bonds can be much less volatile capital market products. Bonds are long-term promissory notes held by lenders. Often, bonds commit the payment interest on the amount borrowed and, usually, an eventual repayment of the principle debt. Some types of bonds include debentures, mortgage bonds, and junk bonds. Debenture is a blanket term for unsecured bonds.

When a company issues a second round of bonds before repaying the first, these debts are called subordinated debentures. These are riskier than regular bonds because the issuing company holds more debt, but the interest payments are usually higher. Mortgages are bonds secured by real property, which makes them generally regarded as less risky than debentures. Junk bonds are debt products that yield high interest, but have a low probability for full repayment of the principle debt.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Link to Sources
Discussion Comments
SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.

SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.